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Shadow assistant treasurer Andrew Leigh told parliament the move to impose a 40 per cent tax on diverted profits from July 1 was an attempt to distract from the government's $50 billion corporate tax cut plan.

The legislation also increases penalties for those that breach their tax reporting obligations.

"Labor will support the bill, but we do note that this government are the hollow men on multinational tax action," Dr Leigh told MPs.

The measure, proposed in the last budget, is expected to raise $100 million a year from 2018/19.

Dr Leigh labelled it a missed opportunity, claiming the opposition's proposed tax avoidance measures would bring eight times more revenue.

"The government needs to drop its corporate income tax cut and adopt Labor's plans to get tough on multinational tax avoidance," he said.